Japan Government Pension Fund Loses $64 Billion In 3Q

Like many other pension funds across the globe, the Japan Government Pension Investment Fund was hammered by the Asian stock market meltdown in the third quarter. The pension fund was down a gut-wrenching 5.6% last quarter as the market cap of its holdings was off by 7.9 trillion yen ($64 billion) from July through September, based on regulatory filings published in Japan on Monday, November 30th.

The Japan GPIF is the biggest pension fund in the world with total assets of around $1.1 trillion.

More on Japan GPIF losses

Of note, the 5.6% loss in the third quarter is the largest percentage drop since April 2008. In detail, the GPIF fund shed 8 trillion yen in its domestic and foreign equities and 241 billion yen on overseas debt, and Japanese bonds helped balance things about a little bit with a 302 billion yen gain.

Pension fund sector analysts point out that the loss was GPIF’s first since doubling its stock allocation and slashing its debt holdings in the fall of last year, and makes clear the risk of short-term losses that is largely unavoidable now given the fund’s aggressive investment style. GPIF execs claim that buying more equities and foreign assets is important today as Japanese PM Shinzo Abe’s policies are boosting inflation which will hurt bond purchasing power.

The GPIF statement noted that the fund had just under 40% of its assets in Japanese debt at Sept. 30th, and 21% in Japanese stocks. The prior quarter the percentages were 38% and 23%, respectively. Foreign stocks represented around 22% of GPIF’s assets as of September 30th, and foreign bonds were 14%.

Statement from GPIF

“Short term market moves lead to gains and losses, but over the 14 years since we started investing, the overall trend is upwards,” Hiroyuki Mitsuishi, a GPIF exec, commented at a presser in Tokyo on Monday. “Don’t evaluate the results over the short term, as looking over the long term is important.”

“Compared to our past portfolio, swings in returns have become wider,” Mitsuishi continued to note. “But in the long-term view, we see there’s less risk of failing to meet pension payouts with the new portfolio.”